CFOtech Australia - Technology news for CFOs & financial decision-makers
Story image
What is professional services automation (PSA) software?
Tue, 13th Feb 2024

Professional Services Automation (PSA) is specialised software that automates the essential tasks for professional services, such as service delivery, resource planning, finances, project management and business performance.

Within those categories, professional services need the tools to support: 

  • Managing resource allocation - through assigning resources across multiple projects, you'll be able to ensure your staff is appropriately utilised. 
  • Logging billable hours - essential for tracking the time spent providing billable services to your clients, so that you can be accurate in your invoices.
  • Forecasting revenue - how you'll be able to ensure you're going to remain profitable, which is an important report for every professional services firm. 
  • Handling time and expenses - managing how you're going to cover your costs and assigning them to the correct project allows you greater control over your profitability. 
  • Sending invoices to clients - all professional services need a good invoicing system to make sure they are paid for their hard work.
  • Managing annual leave for your team - having a full view of your staff's leave in front of you when resourcing your project will reduce the chance of any nasty surprises pushing you past your deadline. 
  • Generating reports - all professional services need to monitor their operational and financial standing; this is also essential for keeping stakeholders informed. 

Through ease of use and connectedness to other software, you'll decrease manual work and errors, enabling your team to focus on providing high-value services to clients. We see first-hand the impact professional services have on the world when they aren't held back by disjointed systems. 

Who is PSA software for?
Professional services automation software is clearly for professional services - but what does that mean?

Professional services firms sell their service/skill/expertise to clients rather than physical products. For them to do this, they need a platform to plan and record their time. They will then be able to charge clients for the service delivery they are providing. PSAs help services businesses stay productive and profitable by providing functions, controls, and reports for finances and operations.
Professional services include most businesses that sell services based on a skill that requires special training. Here are some of the more well-known industries within professional services:

  • Engineering
  • Software development
  • Management consulting
  • Architecture

What are the key features you should expect in PSA software?
Now that you understand the basics let's explore what a PSA platform usually includes and how these tools can benefit your business.

Time tracking
In professional services, keeping a precise record of billable hours is vital for billing clients. PSA tools streamline this by making timesheet collection a breeze, which ensures accurate invoices for your clients.

Invoicing on PSA software is a breeze as it is designed for billable projects. You can use the T&M data gathered from timesheets to generate invoices for clients or use other customisable billing options, such as fixed-fee, percentage-based, or stage-based, to get accurate payment for your work.

The top challenge in North America for project management is manual processes causing timesheet and billing/payroll errors (33.3% of all PSFs surveyed). 

Expense management
PSAs simplify employee expense management by giving both employees and managers one platform for handling expense claims. Top software options allow managers to choose billable expenses, add mark-ups, and use tax options for better expense management.

Resourcing projects
One of the most challenging parts of a Project Manager's job is keeping track of the people working on their projects. PSA tools allow managers to see who is available, at capacity or over-allocated at a glance. They can then resource staff across multiple projects to ensure they are appropriately utilised. 

Revenue forecasting
At the end of the day, professional services need to remain profitable to continue providing high-impact work. Revenue forecasting allows firms to see what they can expect to be paid by clients based on billing preference (T&M or fixed fee). Your revenue forecast will then compare this information against costs and your budget.

31% of Professional Services Firms believe that they face issues with forecasting, future projection and resource planning. 

Reporting to stakeholders is an essential task for all Project Managers. However, it can be a time-consuming task to gather and display your data in a way that tells the story of your project.
Since PSA solutions are designed for professional services, they often come with inbuilt reports that capture the data you need, in a way your stakeholders will appreciate.

Leave management
You want your people to use their annual leave, but you don't want it to derail your projects.

PSA software will allow your team members to submit leave requests and have them approved in one system. This data will then flow onto your resource planner. You'll then be able to assign hours to staff, knowing your resourcing will be accurate.

Understanding key metrics
An important part of running a professional services organisation is knowing how you stack up on key metrics. This is beneficial internally to identify where you can optimise your operations, but also externally to help understand how you compare to industry benchmarks.

Since PSA software is designed specifically for professional services, it has the built-in functions to see key metrics without having to do extensive data manipulation. Here are some of the most important key metrics for professional services that PSAs can help you monitor:

  • Forecasted revenue
  • Project budget burn
  • Resource utilisation
  • Net profit margin

It's essential your PSA software connects with other software
Without a doubt, the connectivity of your PSA software with other tools is not just a feature; it's a non-negotiable necessity. A strong integrated PSA system enables you to connect with popular accounting, CRM, task management software, and more through an open API.

To get an idea of how this might benefit your firm, this is an example of information that could be passed from accounting software to your PSA:

  • Invoices
  • Reimbursable and planned expenses
  • Payment records
  • Leave balances
  • Approved leave to payroll
  • Time entries from hourly workers to payroll

This deep level of connectedness is where the magic happens. No more double-handling financial data or entering time on 2 platforms. When all your software works together, you'll save time that you can spend on providing world-changing solutions.

"Professional services firms can future-proof their businesses against the next wave of disruption by making the right investments today, starting with taking a holistic approach to digital transformation". 

Why is PSA software the best option for professional services?
When businesses are looking to upgrade to PSA software they might already be using a few point solutions or spreadsheets. As they begin to grow, using this combination can become unnecessarily painful and time-consuming.

PSA software works differently to point solutions, as it encompasses all the essential tasks of a professional services firm, plus offers advanced reporting to improve your visibility into the operations of your business. With these insights, you'll be able to make actionable changes and accurately track the process.

What is the difference between an ERP and PSA software?
While researching new software for your business, you may come across the term ERP or Enterprise Resource Planning software. ERPs are designed to help you run your entire business - finances, human resources, manufacturing, supply chain, services, procurement, and more.

While suitable for larger enterprises, some find ERPs overwhelming for professional services due to unused or confusing features. With a PSA solution, you can start with a system that provides the core functions you need and then expand as you need with integrations. What are the benefits of using PSA software?

PSA software will support your firm's purpose
Professional services automation enhances business efficiency and gives businesses extra time and profit which they can then use towards the high-impact, socially responsible projects that professional services organisations provide.
When it comes to engineering teams working on stainable transport initiatives or human service teams informing welfare solutions for children foster care, professional services cannot afford to waste time battling disparate spreadsheets.

The financial return from using a PSA
PSA software is designed to help businesses identify where they can increase revenue and lower unnecessary costs to ultimately improve their margin. It does this by giving businesses the visibility they need to identify risk and opportunity and the tools they need to make actionable adjustments.

For example, with a revenue forecast, you'll be able to see your expected revenue based on your resource plan, which takes into account the cost of your employees and the amount you'll be charging clients for their time. With this tool, you may identify that you're going to go over budget in 3 months' time or have too slim of a margin by the end of your project. You can then go into your resource planning and move around employees so that you can balance your costs while still bringing in enough revenue.

According to SPI Research, companies that use professional services automation software have a better employee billable utilisation rate of 70.9% compared to those that don't use a PSA solution at 68.3%. 4

PSA software: the top choice for professional services
Professional Services Automation (PSA) software stands as a transformative option for professional services businesses. Through automating tasks and minimising errors, it empowers teams to concentrate on delivering high-impact services. 

The advantages of PSA over traditional tools are evident in its streamlined operations, connections to other software options, real-time collaboration, and specialised tools essential to tracking key metrics at a services business.

This not only enhances workplace efficiency but also has a broader impact, fostering positive employee morale and facilitating contributions to socially responsible projects.

PSA software is not just a technological solution but a catalyst for meaningful change and innovation within professional services.

If you're interested in learning more about optimizing your services business, be sure to check this out: